Nigerian Exchange (NGX) Limited in collaboration with NG Clearing hosted an engagement with Pension Fund Administrators (PFAs) on NGX derivatives market on 8 July 2021. The virtual session was part of NGX’s efforts to improve the understanding of derivatives and prepare market participants for the imminent launch of derivatives in the Nigerian capital market.
Speaking at the event, the Divisional Head, Trading Business, NGX, Mr. Jude Chiemeka stated, “In line with our commitment to deepen the Nigerian capital market, NGX will introduce derivatives as a new asset class to the benefit of stakeholders, including PFAs. We are confident that derivatives will provide a greater pool of liquidity and the participation of PFAs in NGX derivatives market will not only allow PFAs to protect their positions but also benefit from various opportunities. That said, being the first line of contact for investors in the capital market, NGX is focused on educating market participants through workshops, webinar and conferences which will continue pre and post-product launch.
Mr. Chiemeka also highlighted three main elements which are critical to the success of any derivatives market and expounded on the efforts of NGX in ensuring these are in place. The areas are: market efficiency and integrity, financial safety and integrity, and customer protection (fair treatment of customers). He further stated, “Ahead of the launch of derivatives, The Exchange trading system, X-Stream – which was deployed by NASDAQ – has been configured to trade derivatives products and there are rules governing order priority. Also, The Exchange has a robust market surveillance system – SMART – to monitor the market on a regular basis for any potentially manipulative behaviour of market participants.”
It would be recalled that NGX received approval for seven derivatives contracts from the Securities and Exchange Commission (SEC) on 28 June 2021. The approved contracts are: Access Bank Plc Stock Futures, Dangote Cement Plc Stock Futures, Guaranty Trust Bank Plc Stock Futures, MTN Nigeria Communications Plc Stock Futures, Zenith Bank Plc Stock Futures, NGX 30 Index Futures, and NGX Pension Index Futures.